IRS chief says backlog from 'Tea Party' affair reduced

WASHINGTON (Reuters) - The U.S. Internal Revenue Service has reduced a backlog of applications for tax-exempt status from political groups that accumulated while the agency was giving extra scrutiny to some of the forms, the acting IRS chief said on Wednesday.

Principal Deputy IRS Commissioner Daniel Werfel testifies before the House Small Business Committee at a hearing on "The Internal Revenue Service And Small Businesses: Ensuring Fair Treatment" in Washington, July 17, 2013. REUTERS/James Lawler Duggan

Danny Werfel updated lawmakers at a hearing on the state of affairs at the IRS months after a furor erupted over the scrutiny that some IRS agents applied to applications from conservative groups with “Tea Party” in their names.

The controversy led to the removal of several IRS officials and set off a crisis of confidence in the agency.

Werfel said the IRS has re-trained its agents not to use proper names like ‘Tea Party’ as a reason to give applications added scrutiny, but rather to focus on political activity.

“The name has to be irrelevant,” Acting IRS chief Danny Werfel told lawmakers at a hearing held by a Ways and Means subcommittee in the U.S. House of Representatives.

He said the process of approving applications is still too slow: “It pains me too ... it is too slow right now,” he said.

Two congressional committees have been probing the IRS’s handling of applications for tax exempt status by political organizations, interviewing more than two dozen officials and combing through tens of thousands of documents.

Among 132 tax-exemption applications stuck in limbo at the IRS for two months or more, the agency has made decisions on 91, with 70 percent of applicants being approved, Werfel said.

Werfel was appointed by President Barack Obama in May on a temporary basis. John Koskinen has been nominated by Obama to become the permanent IRS chief, pending Senate confirmation.

Republicans released data that they said shows conservative groups suffered stiffer scrutiny and were more likely to be audited.

Among 298 applications that were initially held up, 83 percent were right-leaning and 10 percent were left-leaning, according to a Republican analysis of the data.

Republicans have tried to link the matter to the White House, though no evidence has emerged of Obama administration involvement in the added scrutiny.

For their part, Democrats have released documents showing the IRS also scrutinized liberal-leaning groups seeking tax-exempt status.